Rental Car Insurance – Should You Buy Rental Car Insurance?
Your flight landed an hour late. Now, you’ll be late for that important meeting. You can already imagine your customers sitting around a conference table waiting impatiently. You step to the front of the line at the car rental counter, with six other exasperated businessmen behind you who are late for their meetings, too. The rental agent plunks the contract down in front of you, and circles all the places on the contract that you’re supposed to sign or initial. Then she stares at you, as if to say, “Hurry up!” The print is small. The sentences are written in Legalese. You’d like to stop and read the fine print, but you can feel the people behind you getting more upset. You thought you were renting a car for $35.00 per day. With all the add-ons, the cost is now $70.00 per day.
Oh…the pressure…the panic! You cave in, signing and leaving your initials in all the right places. You take your contract and keys and head for your car, inwardly feeling like a failure and mad because you didn’t stand up for yourself.
If the preceding story is too familiar, there’s hope just ahead!
It doesn’t matter if you’re a regular car renter or just an occasional traveler who needs to rent a car, you’ll likely face these kinds of choices at the car rental counter. Some folks just decline everything. Some folks purchase all of the coverage offered.
But…are you wasting bunches of money on unneeded coverage or leaving yourself dangerously under insured? Before leaving on your trip, I recommend that you make two phone calls – one to your auto insurance company and another to the credit card company you’ll be using to pay for the rental car. You’ll need to find out if you have automatic coverage for your car rental from each company, and the various terms and conditions for that automatic coverage.
FIRST…CALL YOUR CAR INSURANCE COMPANY
In your personal or business auto insurance policy, there is coverage for damage to your auto. The Insuring Agreement in most policies says: ” We will pay for direct and accidental loss to ‘your covered auto’ or any ‘non-owned auto,’ including their equipment, minus any applicable deductible shown in the Declarations.”
Another phrase is VERY IMPORTANT!
“If there is a loss to a ‘non-owned auto’, we will provide the broadest coverage applicable to any ‘covered auto’ in the Declarations.” Here’s an example of how this would work for you:
You have two vehicles. One is a 2006 Toyota Camry with full coverage. It’s worth $24,000. The other is a 1980 Chevy S-10 pickup worth $1,500 that you only use for trips back and forth to the local home improvement store, and you only have liability coverage on the pickup. If you rented a car and it got damaged, your insurance company would provide the full coverage for the rental car, which is the broadest coverage in your policy.
If you normally drive an older car with only liability insurance on it, there will not be any property damage insurance extended to the rental car. In this instance, you should either use the credit card’s Collision Damage Waiver or buy the CDW from the car rental company.
Ask your insurance company representative how much coverage you have on your car. Ask if there is a limit of value on your Collision coverage. If there is a limit, and you drive a 7 year old Ford Taurus that’s worth $5,500…and you rent a new Cadillac Escalade that’s worth $55,000…will your personal auto insurance cover the damage to the higher valued vehicle? REALLY important to know this…you could owe the rental car company tens of thousands of dollars to repair or replace a high value rental vehicle if you’re not properly covered.
Find out the limits of liability. Make sure that your limits are higher than the minimum limits required by your state. Limits above $100,000 per person/$300,000 per accident for Bodily Injury, and $100,000 for Property Damage are very inexpensive. Make sure that you limits are no less than that amount…higher would be better.
Find out what collision and comprehensive deductibles you have on your car, because those deductibles will apply when you rent a car and use your own insurance for rental coverage.
Make sure that you have Uninsured Motorist and Underinsured Motorist coverage on your personal or business policy. If you are in an accident with an uninsured motorist, and the accident is his fault, recovery will be practically impossible. Likewise with a motorist who is underinsured. Best to have your own coverage protection.
Q: What if I don’t own a car, and don’t have car insurance?
A: If you do not own a car, you won’t have an automobile policy. You should buy the rental car coverage, both the CDW and liability coverage. Or, you should use your credit card’s CDW and buy the optional liability coverage from the rental car company. If you’re a frequent car renter, however, you can still buy a “non-owner” liability policy. This solution might save you money over the coverage available through the car rental company.
Q: What happens if my personal property inside the car gets damaged or stolen?
A: Most Collision Damage Waivers provide coverage for theft of the vehicle, but not any personal property stolen or damaged inside the vehicle. Check your homeowners or renter’s insurance policy because you may have coverage through them for your stolen or damaged personal property. A deductible will likely apply.
Here’s a super important tip! Some people think that, if they purchased the Collision Damage Waiver or used the CDW from their credit card, and the rental car got damaged, they don’t have to report it to their own insurance company. They are hoping that because the CDW covers the damage, it won’t affect their own insurance policy….and they won’t get a rate increase. WRONG!!! Don’t be misled into thinking that you can get away without reporting your accident to your own insurance company. In most accidents, more things get damaged than just the rental car. Even if your accident is just you running into a guardrail, whoever owns that guardrail is going to look to you to pay for the damages. Also, other people might have been injured. You could have a large liability exposure, and you might need your personal or business auto policy to cover your loss. Your insurance policy includes legal representation if someone files a lawsuit against you for damages.
If you’re going to use your own personal or business auto coverage, decline the Collision Damage Waiver on the car rental contract.
NEXT…CALL THE CREDIT CARD COMPANY
Ask your credit card company about the benefits they offer. Each company is different, and each level of credit is different. For example, a regular card might have different insurance benefits than a gold or platinum card. Ask the card company to send you your benefits IN WRITING. If you’re in a hurry, ask them to fax or email it to you.
Some cards may only cover collision and comprehensive, and leave you uninsured for liability. Some cards only offer coverage when you rent from a certain rental company. Some restrict the number of days of coverage. Some cards don’t automatically cover you and require you to sign up for a particular program. Still others limit the kinds of vehicles you can rent. (see below for some exclusions)
If you have more than one credit card, call each one and find out the card with the best benefits. Then, use that credit card to pay for your rental car, and use their benefits.
If you’re planning on using the credit card company’s coverage, you must decline the Collision Damage Waiver shown in the rental car contract. Otherwise, the credit card company’s coverage will become excess to the coverage in the rental car company’s Collision Damage Waiver. “Excess” means that any other available coverage would pay first, and the credit card coverage would pay any remaining portion of the loss.
Credit card Collision Damage Waivers cover:
o vehicle damage
o loss of use
See your credit card company’s written CDW for all the details.
Collision Damage Waivers exclude:
o Injury to anyone or damage to anything inside or outside the rental vehicle.
o Loss or theft of personal belongings.
o Loss due to intentional acts, like DUI, drug use or other illegal activities.
o Off-road operations. If you rent an SUV and take it off-road, no coverage.
o Rental periods of more than 15 days within your country of residence, or more than 31 days in a foreign country.
o Vehicles that do not meet the definition of “covered vehicles,” such as:
– expensive, exotic and antique vehicles
– certain vans
– pickup trucks
– other trucks
– motorcycles and ATVs
See your credit card company’s written CDW for all the details.
CAR RENTAL INSURANCE
Most major rental car companies offer these four coverages.
o Collision Damage Waiver (CDW). This covers a rental vehicle damaged by an accident, vandalism, theft or loss of use. Costs range between $9 and $20 per day.
The most misunderstood part of car rental coverage is the Collision Damage Waiver, or sometimes called the “Auto Rental CDW.”
Remember…the car rental CDW provided by the car rental company is not insurance. Insurance is regulated by each state. Collision Damage coverage is a waiver. The car rental companies agree to not hold the renter responsible if the rental car is damaged or stolen, and they guarantee that they will pay for certain damages listed in their coverage agreement.
In many cases, the waiver also provides “loss of use” coverage, which pays the rental company if the damaged or stolen car cannot be rented. In most states, car insurance policies don’t cover loss of use. So, if you choose not to buy the Collision Damage Waiver, you might have a loss of use exposure if the rental car gets damaged. But if you’re using your credit card’s automatic coverage, it will pay for that loss of use.
Some car rental companies will require you to pay for repairs or replacement costs out of your own pocket up front, and then you have to get reimbursed by your own insurance company. Being forced to come up with thousands of dollars in immediate cash could ruin a vacation. You’re protected from these up-front costs by the CDW. Read your rental contract CAREFULLY!
o Personal Effects Coverage. This provides coverage for theft or damage to personal items inside the rental car. Costs range between $2 and $5 per day.
o Supplemental Liability Insurance. This provides liability coverage up to $1 million. Costs range between $7 and $9 per day.
o Personal Accident Insurance. This covers you and passengers in your vehicle for medical expenses. If you already have personal health policies or travel policies, it won’t be necessary to buy this optional coverage. It usually costs between $3 and $5 per day.
Corporate Travelers. If you’re a frequent traveler for business, do one other thing. Check with your company to find out if they have a corporate travel policy. If they do, find out what that policy covers, and then simply don’t buy duplicate coverage on the rental car contract.
Car rental outside your country of residence. Some insurers exclude coverage if you’re driving in a foreign country. Some will cover you, but only a limited time. Some credit card companies cover car rentals outside your country of residence. Check with your insurance company and credit card company for specific details, and GET IT IN WRITING!
Q: Can I allow others to drive my rental car?
A: If you’re using your personal or business auto coverage to cover your rental car, the chances are all “authorized drivers” are covered. An “authorized driver” is anyone listed on the policy. However, here’s a BIG GOTCHA! If your teenaged son drives your rental car and he allows his girlfriend to drive the car, you’re covered. If the girlfriend allows another person to drive, NO COVERAGE!
Some car rental companies have exclusions for young drivers. Some charge extra for young drivers. Find out this information BEFORE you arrive at the car rental counter.
Q: How do I file a claim if I’ve had an accident?
A: When you experience the damage or theft, immediately get a camera and take lots of photos of the damage, including any other autos or property that was damaged. Keep those photos! Notify the rental company IMMEDIATELY of the damage.
Report the damage to your own auto insurance company if you have personal or business coverage.
When you return the vehicle to the rental company immediately ask for:
o A copy of the accident report and any claim documents, which should show the amount you’re responsible to pay, as well as any amounts that have been paid toward the claim.
o A copy of the initial and final auto rental agreements.
o A copy of the repair estimate or the paid repair invoice.
o A police report, if one exists.
So the bottom line is this:
If you have personal auto insurance, commercial auto insurance or corporate travel coverage, it is usually not necessary to pay for the Collision Damage Waiver or extra coverages offered to you by the rental car contract. Your situation may vary.
Get everything in writing, and make an informed decision. Then enjoy your car rental experience!